Roku Enters the Market With a Bang

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Roku Inc. (NASDAQ: ROKU) entered the market with a bang on Thursday morning as one of the most anticipated initial public offerings (IPO) this fall. The firm priced its 15.67 million shares at $14 apiece — the high end of the expected price range — although shares actually entered the market closer to $16. The entire offering is valued up to $219 million, giving the company a valuation of over $1.3 billion.

This company connects users to the streaming content, enables content publishers to build and monetize large audiences, and provides advertisers with unique capabilities to engage consumers.

As of the end of June, Roku had 15.1 million active accounts. By comparison, the fourth largest multichannel video programming video distributor in the United States had approximately 13.3 million subscribers in this time as well. Users streamed more than 6.7 billion hours on the Roku platform in the six months ended in June 2017, 62% growth from the six months ended June 2016.

Roku’s financial growth also has been impressive. It generated revenue of $199.7 million in the first six months of 2017, up 23% from $162.3 million in the same six months of 2016. Its fiscal 2016 revenue of $398.6 million was up 25% from the $319.9 million in fiscal 2015.

There is a changing pattern in how its revenue gets generated. During the first half of 2017, player revenue represented 59% of total revenue and declined 2%, while platform revenue represented 41% of total revenue and grew 91% from the first half of 2016. In fiscal 2016, player revenue represented 74% of total revenue and grew 9%, while platform revenue represented 26% of total revenue but grew by 110% from 2015.

However, there are some pitfalls to be wary of: the online streaming industry has a few very big players involved and Roku might be considered a small boat on this very big ocean. Licensing agreements and content that some of the larger competitors have could prove to be too much for Roku over time.

The underwriters for the offering are Morgan Stanley, Citigroup, Allen, RBC Capital Markets, Needham, Oppenheimer and William Blair.

Shares of Roku were last seen up more than 30% at $18.40, with a range of $15.76 to $18.55 on the day. Just before noon Eastern about 15 million shares had moved.